Memorandum of Conversation, by the Acting Secretary of State

Participants: Dr. Kan Chieh-hou, Personal Representative of Acting President Li Tsung-jen
Dr. V. K. Wellington Koo, Chinese Ambassador
Mr. James E. Webb, Acting Secretary
Mr. Philip D. Sprouse, Chief—CA
Mr. Fulton Freeman, Asst. Chief—CA

Dr. Kan Chieh-hou called on me this morning by appointment accompanied by Ambassador Koo and presented me with a letter from Acting President Li to Secretary Acheson.35 (A copy of this letter was handed to Mr. Butterworth during his conversation with Dr. Kan on June 1.)

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Dr. Kan then proceeded to outline the manner in which Acting President Li expected to utilize all the forces at his command to defend south and west China against the Communists much as he had explained it to Mr. Butterworth (Tab A).36 Notable, however, was the absence of any criticism of the Generalissimo by Dr. Kan and of any indication of a split between the Generalissimo and Li, both of which were emphasized in Kan’s conversation with Mr. Butterworth. The obvious reason for this change of tactics was the presence of Ambassador Koo, a strong Generalissimo supporter.

In support of his statement that there was still time for US assistance to be effective in south China, Dr. Kan stated that he had received a telegram from Li yesterday to the effect that Communist pressure on Changsha (in Hunan Province) and Canton had been somewhat relieved, that the morale of the Nationalist troops in south China was excellent and that Li was hopeful of establishing a line somewhere across Hunan and Kiangsi provinces which would keep the Communists some 2–300 miles from Canton.

Dr. Kan urged that two specific measures be taken by the US to strengthen Li’s resistance to the Communists: moral support, in the form of a statement of sympathy and encouragement, and economic aid, in the form of a loan or grant in silver. In connection with Kan’s request for a statement, he pointed to the increasing speculation in the press over the question of possible US recognition of the Chinese Communist regime37 and urged that the US disclaim any such intention. I replied that I had made a statement on this matter at my press conference last week indicating at that time that there was as yet no Communist government in China and that it would apparently be some time before such a government could be established.

With regard to Dr. Kan’s second point—economic aid—he stated that Acting President Li was hopeful that the US would investigate the possibility of using a portion of the unexpended ECA funds (Dr. Kan referred to these funds as being “approximately $100 million”) for the purchase of silver with which to support the depreciating currency in China. Kan stated that China’s funds were adequate to purchase approximately US $20 million of minted silver coins, but he emphasized that to have any permanent effect this amount would have to be followed by assurances of a much larger amount.

Ambassador Koo expanded on and reiterated Kan’s request that unexpended ECA funds be used for the purchase of silver and added that he had one further request to make which “would not cost the US anything.” This, he stated, was that Ambassador Stuart be instructed [Page 708] to visit the capital at Canton en route to the US38 for consultation which, according to Koo, would do much to raise the morale of the National Government.

At the conclusion of the conversation I informed Dr. Kan and Ambassador Koo that, as I had only comparatively recently undertaken my position in the Department, I was not in a position to give them definitive replies to their requests. I assured them, however, that I would discuss the substance of our conversation with Secretary Acheson who was returning shortly to Washington39 and would make suitable reply to Acting President Li in due course. I also informed Ambassador Koo that I would investigate the possibility of utilizing ECA funds for the purchase of silver and would inform him in the premises.

  1. Dated May 5; see footnote 10 to letter of May 5, p. 699.
  2. June 1, p. 701.
  3. For correspondence on this subject, see pp. 1 ff.
  4. For correspondence on this subject, see vol. viii , “The Embassy in China after occupation of Nanking by Chinese Communists”.
  5. He had been participating in a meeting of the Council of Foreign Ministers at Paris.